ELECTRONIC ARTS INC. Q3 FY2024 earnings call

• Strong Q3 performance with high-quality games and experiences driving deep engagement and record live services.
• EA SPORTS FC 24 launch outperformed expectations with strong engagement across its ecosystem.
• Madden NFL 24 saw growth in net bookings and engagement.
• Sims franchise had significant growth in player hours spent.
• Battlefield 2042 community continued to grow.
• Plans for FY '25 include expanded portfolio of connected ecosystems, with EA SPORTS launching strong core slate of titles, accelerated innovation for FC, continuation of momentum in Madden NFL including bringing back EA SPORTS College Football, and expansion of storytelling and connected experiences across titles.

In the third quarter, live services net bookings grew to a record $1.71 billion, up 3% year-over-year (or 5% in constant currency), making up 73% of trailing 12-month net bookings. Full game net bookings were $654 million, down 5% year-over-year (or 4% in constant currency). EA SPORTS FC 24 launch was a success with double-digit net bookings growth in Ultimate Team, FC Mobile had daily active users up 29% year-over-year, and FC Online grew new players by 20% year-over-year. Madden NFL 24 saw net bookings growth and increased engagement with Ultimate Team. The Sims franchise had players spending 1.8 billion hours in Q3 2023, a nearly 30% increase from the prior year. Battlefield 2042 community grew with total players up 17% year-over-year. Apex Legends had mixed results but recent cross-over promotion showed early promising signals.

• Q4 net bookings expected $1.625 billion to $1.925 billion, down 16% to up 1% year-over-year, including timing impact.
• FY '25 expected low-single-digit net bookings growth in a lighter release slate year, mid-to-high single-digit growth in underlying profitability.
• Long-term goals focus on accelerating growth, delivering forward operating leverage, and increasing cash flow through expanded player acquisition, engagement, and retention; highly accretive digital and live services; blockbuster new releases; and discipline in cost structure.

• Competitive market conditions that could impact performance.
• FX fluctuations that may affect results.
• Timing of content releases and their impact on net bookings.
• Execution risks related to new initiatives and maintaining community engagement.

Q: About the wide guidance range for Q4, why is that?

A: The range reflects the strong and dynamic services like FC with a record World Cup comp and Apex in its largest quarter, along with an eight-point headwind from timing of prior year content releases.

Q: On operating leverage drivers, what are the primary factors?

A: Compounding growth across core franchises, new releases from pipeline, expanded player acquisition/engagement/retention, and discipline in cost structure to align with strategic growth opportunities.

Q: Early learnings on app store fees in Europe?

A: Actively reviewing updates, but no immediate reflection on gross margins yet.

Q: Thoughts on college football's opportunity and relation to Madden?

A: College football is additive, with Madden performing well and college football representing pent-up demand, expected to be complementary and additive to the ecosystem.

Q: Opportunities with sports communities across different sports?

A: Significant opportunity to harness the power of the large sports community inside and outside games, leveraging EA SPORTS brand and existing relationships with licensed partners.

Q: State of mobile industry and mobile bookings?

A: Mobile bookings saw modest growth, with sequential improvement, strength in FC within the mix, and focus on leveraging biggest opportunities and disciplined P&L performance.

Q: Partnerships and crossovers in Apex?

A: Final Fantasy crossover was well-received, showing promise for future crossovers while protecting core gameplay and lore.

Q: Opportunity with new platforms like potential Nintendo switch?

A: New platforms with improved specs are generally beneficial as they enhance player immersion for games like FC, Madden, etc.

Q: Pipeline and growth beyond FY '25?

A: Expect acceleration in net bookings growth beyond FY '25 with portfolio of IP, compounding growth in core franchises, new content, and iconic new releases, driving operating leverage and increased cash flow.